If you think customer service has gone to the dogs, guess what? Many companies don’t care.
Research from the University of Minnesota posits that many businesses intentionally make it hard for consumers to complain — and it works.
“There may be profitable advantages for the firm to induce customer hassles,” said Yi Zhu, an associate marketing professor at the Carlson School of Management and co-author of a report on customer service frustrations. “If they refund everything, they’re going to lose money.”
With the busy holiday-shopping season coming to a close, more consumers are finding themselves dealing with returns, travel delays and such things as service contracts for cable TV or smartphones.
Zhu decided to apply academic rigor to the subject after being put through the wringer by a large airline company. His co-author, Anthony Dukes, a marketing professor at the University of Southern California, was pulling his hair out dealing with a bank over a mortgage issue.
“Why do all these companies use similar ways to beat you up, to make it harder to talk to somebody to get a refund?” Zhu wondered. “That was the starting point to think academically about this.”
The two essentially set out to test the old marketing saw, “Please hold. Your call is important to us.”
The answer: Maybe not so much.
Companies deliberately employ inefficient, multistep processes hoping that you will give up so they can avoid giving you a replacement or refund, according to the report, published in the May issue of Marketing Science. As a “collateral benefit,” companies avoid the labor costs of hiring people who might be able to solve your problem.
“If you have this tiered design, you can definitely improve your profit — and you can definitely [tick] people off in the process,” Zhu said.
For context, Zhu said he and Dukes relied on anecdotal stories and other published reports rather than independently measuring customer service models across various industries. But they were able to develop a mathematical model around a “unit hassle cost,” which they defined as the level of annoyance or frustration a person experiences when being inconvenienced.
Customers with less severe complaints find that the additional hassle of speaking with a manager is not worthwhile.
Zhu and Dukes demonstrated how a company’s tiered customer-service operation “exploits customer hassle costs” to screen claims and reduce the number of payouts. (The authors acknowledge that this process also enables companies to screen out illegitimate claims.)
“You call them, most of the time you don’t talk to a real person,” Zhu said. “You wait in the queue because they claim there are lots of calls, maybe they say they’ll call you back in an hour. You finally talk to somebody and they say, ‘I don’t have the authority to resolve your issue.’ You wait while they transfer you to someone of higher rank. And then you have to repeat what you’ve already said.”
No one is immune from assessing the trade-offs of a unit hassle cost.
U.S. consumers spend an average of 13 hours a year waiting on customer-service calls, according to one report the authors cite, published in 2013.
A 2017 “Customer Rage” study, conducted by Arizona State University, found that while companies are making it easier than ever to buy products and services, nearly eight in 10 consumers who complained about a problem in the past year still weren’t happy with the way it was handled.
The report, the eighth since 1976, reported a slight increase in satisfaction but gave businesses a “failing grade,” warning that they risk putting more than $300 billion dollars of future sales at risk.
Some businesses said artificial intelligence, or AI, has the potential to better match a customer’s needs with the agent that can help. Zhu isn’t convinced that talking to computers is the answer.
“You have to say certain keywords to get what you want,” he said. “It’s very annoying.”
He said he knows of cases where AI is used to detect the emotions of consumers: “They will only transfer you when you are about to explode.”
Companies that put a premium on customer service typically are those trying to gain market share.
Zhu pointed to Amazon, the world’s largest retailer, which has been losing money for years on one-day and same-day shipping to entice customers to become Amazon Prime subscribers.
“Amazon is trying to dominate and build up leverage in the online world,” Zhu said. “Once they have this leverage, once they’re focused on profit, we believe customer service will sadly go down.”
People’s ability to deal with the hassle factor when lobbing a complaint varies across demographics, the study said.
Younger people can more easily navigate an online complaint process. Women tend to get more annoyed than men and bail out earlier. And blacks and Latinos are less inclined to complain than college-educated whites, according to research from the U.S. Federal Trade Commission and cited in the report.
For all of the report’s mathematical modeling and confirmation of what we all know already, Zhu doesn’t expect companies to change their ways.
“For something to change, we first have to understand it,” he said. “That’s what we’re trying to do here.”
In other words, get used to it.